$10 Billion Lost Over 23 Years

If Motor Fuel Taxes had been adjusted for inflation over the past 23 years, the state would have generated $10 billion in additional transportation revenues, according to a new report from the Illinois Economic Policy Institute [PDF]

Despite the 25 percent rise in usage of Illinois’ highways, roads, and bridges over the past two and a half decades, the Motor Fuel Tax revenues have not kept pace. Approximately 42 percent of Illinois’ roads are in “poor” or “mediocre” condition and 16 percent of bridges are “structurally deficient.” The state’s overdue infrastructure maintenance has created numerous safety, congestion, and freight movement challenges.

While cars are more fuel efficient today than they were in 1993, they continue to do the same amount of damage to roads. The average motorist paying a 19-cent gasoline tax per gallon or a 21.5-cent diesel tax per gallon today is contributing less in funding that he or she was in 1993, due to both higher inflation and improved fuel efficiency.

If Motor Fuel Taxes had kept up with inflation, the gasoline tax would have been 12 cents higher in 2015, at 31 cents per gallon, and the diesel tax would have been 15 cents higher, at 35 cents per gallon. The gasoline rate would have gone up by 0.6 cents per gallon on average per year since 1993 if the tax had included an inflationary adjustment.

It is not too late for an inflationary adjustment to the Motor Fuel Tax.
A 15-cent adjustment in both the gasoline tax rate to 34 cents per gallon and the diesel tax rate to 36.5 percent per gallon would raise $1 billion in new annual revenues, restoring Motor Fuel Tax funding to 1993 levels after accounting for inflation. The per-gallon rates could then be indexed to inflation, with new revenues dedicated entirely for transportation infrastructure.

The inflationary adjustment could be passed immediately. If an immediate 15-cent correction is not possible, Illinois could gradually adjust the Motor Fuel Tax though three 5-cent increments by 2018.

As of February 2016, Illinois has the 17th-lowest average gasoline price in the country. The average cost of gas has decreased significantly since 2014, with an average of $1.62 per gallon in February 2016. Even with a 15-cent inflationary adjustment, Illinois would not currently be among the top 20 states with the highest gas prices.

State lawmakers can address the declining purchasing power of infrastructure investment funds and the deteriorating transportation systems of Illinois by adjusting the Motor Fuel Tax in upcoming years. The tax adjustments can help provide a sustainable level of funding over the long term.

Illinois has lost $10 billion that could have been dedicated to multi-modal transportation systems by not adjusting Motor Fuel Taxes for inflation.

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Illinois’ population has increased by over 1 million residents since 1993, resulting in more vehicles on the roads. Thus, demand for the state’s transportation infrastructure has increased over time, but revenue taken in to meet the demand has fallen. Instead of a $1.3 billion Motor Fuel Tax intake in 2015, revenue would have been $2.2 billion with proper inflationary adjustments – which is a revenue gap of over $851 million simply by not keeping pace with 1993 levels of funding.

Infrastructure investments allow businesses to thrive, create thousands of jobs, and boost the economy. Now is the time for action to properly fund and invest in all modes of transportation in Illinois. 

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